Mexico, despite world oil glut, keeps on pumping, cuts prices
Mexico's oil gusher is going to keep pumping at its record rate and at slashed prices -- even though most members of OPEC favor production cuts and higher prices.
"There is no reason for us to change our plans," says Jorge Diaz Serrano, director general of Petroleos Mexicanos (PEMEX), the state oil monopoly.
The world's fourth-largest oil producer is slashing its crude oil prices by $ 4 a barrel to keep selling at its present rate of 2.7 to 2.8 million barrels a day. But it is telling the United States and its other oil customers that it will not boost production any more than that for the time being.
All this comes less than a week before Mexican President Jose Lopez Portillo goes to Washington for meetings with President Reagan. The North American energy equation will be one of the prime topics.
In answering the recent OPEC call for production cutbacks, Mexico has let Washington know in advance just what its position is -- and it is unlikely there will be any change as result of the energy discussions.
A PEMEX spokesman here, commenting on the Mexican decision not to raise production any further for now, says "we don't want to take advantage of OPEC's cutbacks." Mexico is not a member of OPEC, the international oil cartel, and therefore is not subject to OPEC decisions.
But Venezuela, the other major Latin American oil producer, is going along with the OPEC cutbacks ordered at the late-May Geneva meeting.
The cutbacks are designed to dry up the global oil glut that has softened prices for petroleum products during the past six months.
Venezuelan output will drop 200,000 barrels a day; just over 2 million barrels per day are being produced now.
Humberto Calderon Berti, the Venezuelan minister of energy and mines, said the cuts will affect exports, not domestic consumption. At the moment -- Venezuela exports 1.7 million barrels daily -- more than half of which are used by US utilities to generate electricity and by large US apartment houses for heating purposes. A cutback to 1.5 million barrels daily in exports is expected to have limited effect in the US during the summer season.
Moreover, US oil demand generally is down by about 6.2 percent so far this year.
Even if the Venezuelan cutbacks cause problems, Mexican exports would offset them. There is likely to be no cutback in Mexican shipments to the US, which currently hover around 750,000 barrels daily, up 100,000 from a year ago. Mexico supplies about 10 percent of US oil imports.
Some Reagan administration officials would like to see increased Mexican sales to the US since Mexican oil is regarded as a safe and close-at-hand source.
But Mexico, in announcing its production plans, again reemphasized that it would sell no one country more than half of its total exports. Six US companies now receive just half of Mexico's total production. The remainder goes to 20 countries in Europe, the Americas, and the Caribbean.
Under Mexico's new price structure for its crude, which is retroactive to June 1, the price of its Isthmus (light crude) will be $34.50 a barrel, and its Maya (heavy crude) will be $28 a barrel. This marks a significant reduction in price and comes only a week after Mexico indicated it would continue to sell its oil at a price slightly high er than OPEC's.